_________________________________________________________________
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 18, 1995
SOVEREIGN BANCORP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 0-16533 23-2453088
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Ident. No.)
1130 Berkshire Boulevard, Wyomissing, Pennsylvania 19610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 320-8400
N/A
(Former name or former address, if changed since last report.)
_________________________________________________________________
_________________________________________________________________<PAGE>
Item 5. Other Events.
The press release of Sovereign Bancorp, Inc. dated
October 18, 1995, announcing, among other things, earnings for
the third quarter of 1995, is attached as Exhibit 99 hereto and
is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(a) Exhibits.
The following exhibit is filed herewith:
99 Press Release, dated October 18, 1995, of
Sovereign Bancorp, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
SOVEREIGN BANCORP, INC.
Dated: October 23, 1995
By/s/ Karl D. Gerhart
Karl D. Gerhart
Chief Financial Officer and
Treasurer
<PAGE>
EXHIBIT INDEX
Page Number
In Manually
Signed
Exhibit Number Original
99 Press Release, dated October 23, 1995,
of Sovereign Bancorp, Inc.
EXHIBIT 99
DATE: October 18, 1995
FOR IMMEDIATE RELEASE
FOR FURTHER INFORMATION CONTACT:
Karl D. Gerhart (610) 320-8415
Richard A. Elko (610) 320-8415
Linda Hagginbothom (610) 320-8498
SOVEREIGN ANNOUNCES
3RD QUARTER NET INCOME UP 18%
WYOMISSING, PA., Sovereign Bancorp, Inc.
(NASDAQ-NMS-SVRN), parent company of Sovereign Bank, FSB
("Sovereign"), announced that Net Income for the 3rd Quarter 1995
increased 18% to $14.4 million from 3rd Quarter 1994 Net Income
of $12.2 million. Earnings Per Share ("EPS") for the 3rd Quarter
1995 were $0.26, an increase of 8%, compared to $0.24 per share
for 3rd Quarter 1994. Sovereign's Year-to-Date Income increased
17% to $40.7 million from Year-to-Date Net Income of $34.8
million for 3rd Quarter 1994. EPS for nine-months ended
September 30, 1995 was $0.77, an increase of 8% from EPS for the
nine-months ended September 30, 1994 of $0.71.
For the 3rd Quarter 1995, Return on Average Equity was
14.39% and Return on Average Assets was .80%. Year-to-Date
Return on Average Equity was 14.88% and Return on Average Assets
was 0.77%.
"We are pleased with Sovereign's 3rd Quarter Earnings
growth, despite an unfavorable interest rate environment and slow
adjustable rate mortgage ("ARMs") loan volume growth due to a
relatively flat yield curve," said Jay S. Sidhu, Sovereign's
President and Chief Executive Officer. "As an alternative to ARM
originations, we have emphasized the origination of fixed rate
loans which are being sold in the secondary market to building
our servicing business," Sidhu continued.
Originations during the 3rd Quarter of 1995 were $240.6
million, of which approximately 62% were fixed rate loans. Total
Year-to-Date Originations were $525.7 million. Net Interest
Income for the 3rd Quarter of 1995 was $43.7 million compared to
$40.5 million for the 3rd Quarter of 1994, an increase of 8%.
The Net Interest Spread was 2.39% of Average Assets for the 3rd
Quarter of 1995 and 2.43% for nine-months ended September 30,
1995.
"The compression in the Net Interest Spread was caused
primarily by the growth in the Short-Term Investment Portfolio at
only a 1.1% average spread. Core Banking spreads were about 2.6%
during the 3rd Quarter," stated Karl D. Gerhart, Sovereign's
Treasurer and Chief Financial Officer. Mr. Gerhart went on to
say that, as Earning Assets grow and replace these short-term
investments the spread should widen.
Other Income was $4.9 million for the 3rd Quarter of
1995, an increase of 23% compare to $4.0 million for the 3rd
Quarter of 1994. Sovereign's ratio of General and Administrative
Expenses to Average Assets was 1.27% for the 3rd Quarter of 1995,
an improvement from 1.45% for 3rd Quarter 1994. "We are
extremely pleased with the results of our Cost Awareness Program
which encourages every Team Member to analyze their specific task
and implement more efficient methods of providing quality work,"
stated Sidhu. "The pay-off from this program is clearly
indicated by the reduction in Operating Expenses in the 3rd
Quarter to $23.7 million, compared to Operating Expenses in 2nd
Quarter 1995 of $25.7 million," Sidhu continued.
Sovereign provided $250,000 for possible loan losses
during the quarter which reflects Sovereign's conservative
strategy toward above average asset quality and conservative
level of reserves. The ratio of Non-Performing Assets to Total
Assets improved to .56% at September 30, 1995 from .62% at
December 31, 1994. The ratio of Non-Performing Loans to Total
Loans was .78% and the Allowance for Possible Loan Losses as a
percentage of Non-Performing Loans was 94% at September 30, 1995.
Total Assets at September 30, 1995 were $7.8 billion,
as compared to Total Assets at December 31, 1994 of $6.6 billion.
Total Deposits and Shareholders' Equity were $5.0 billion and
$415.0 million, respectively at September 30, 1995, compared to
$4.0 billion and $303.9 million, respectively at December 31,
1994.
In pursuing Sovereign's strategic initiatives of
developing high quality, low risk assets and providing
alternative delivery systems, Sovereign recently introduced the
Sovereign Bank Tax Deductible Credit Card. With this card
Homeowners can deduct the interest paid on their credit cards
from their federal income taxes.
At September 30, 1995, total credit cards outstanding
were 6,247 cards with outstanding balances of $3.8 million.
"Sovereign is processing approximately 5,000 credit card
applications per month. If this trend continues, this new
product will enable Sovereign to attract new customers and
provide fee and interest income to the Bank," remarked Sidhu.
Sidhu also commented that in keeping with Sovereign's
focused growth strategy, Sovereign recently announced the planned
acquisition of West Jersey Bancshares, Inc. ("West Jersey").
This acquisition, coupled with Sovereign's pending acquisition of
Colonial State Bank ("Colonial") will enable Sovereign to create
a new highly focused Commercial Banking Division. This division
will concentrate on providing loans, primarily collateralized by
real estate, to professionals and small to mid-sized businesses.
"We view both the Tax Deductible Credit Card and the
selected professional and business banking initiatives to be
complementary to our main focus of originating residential
mortgage loans. We expect these new products to contribute to
Core Earnings in the future," stated Sidhu.
In addition to the two commercial bank acquisitions,
Sovereign recently announced the planned acquisition of two
Community Banking Offices ("CBOs") from Berkeley Federal Bank &
Trust, FSB ("Berkeley"). The acquisition of the Berkeley CBOs is
a natural extension of Sovereign's northern New Jersey franchise
into the growing market of Bergen County. Adjacent to New York
City, Bergen County supports a strong housing market for the
commuting New York professionals.
"Sovereign remains committed to building Shareholder
value by continuing to look for strategic acquisitions and
implementing strategic initiatives for developing high quality,
low risk assets and alternative delivery systems," commented
Richard E. Mohn, Sovereign's Chairman of the Board.
Sidhu also commented that it appears as though Congress
is close to a solution regarding the Thrift Industry's SAIF Fund.
"A one-time special assessment of at least .85% of deposits
appears almost certain," said Sidhu. "While this one-time
special assessment will cost Sovereign approximately $22 million
after taxes, the corresponding reduction in the FDIC premiums
will save Sovereign almost $6 million after taxes each year.
Therefore, Sovereign will recoup the special assessment over a
three to four year period. Sovereign views this as a
satisfactory solution to the premium disparity issue and will
continue to work toward a global resolution that will merge the
BIF and SAIF Funds, consolidate the regulatory structure and
create a level playing field to maximize free market
competition," continued Sidhu.
Sovereign is a $7.8 billion Company with 119 Community
Banking Offices operating in marketing divisions in eastern
Pennsylvania, New Jersey and northern Delaware. The closing
price of Sovereign's Common Stock on Wednesday, October 18, 1995
was $10.5625 per share and its Preferred Stock closed at $59.25
per share.
THE END
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
KEY STATISTICS
<TABLE>
<CAPTION>
Performance Statistics 3 Months Ended 9 Months Ended
September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Return on average assets 0.80% 0.85% 0.77% 0.87%
Return on average equity 14.39% 17.41% 14.88% 16.75%
Gen. & admin. exp. on average assets 1.27% 1.45% 1.42% 1.52%
Coverage ratio (1) 186.51% 193.34% 173.60% 192.24%
<CAPTION>
Control Statistics At September 30, 1995 At December 31, 1994
<S> <C> <C>
Stockholders' equity to total assets 5.28% 4.63%
Risked-based capital ratio (2) 12.66% 12.65%
Allowance for loan losses to total loans 0.74% 0.83%
Non-performing assets $43,817,342 $40,541,000
Non-performing assets to total assets 0.56% 0.62%
General reserves for loan losses to
non-performing loans 93.88% 114.11%
Non-performing loans to total loans 0.78% 0.72%
<CAPTION>
Stock Statistics (3) At September 30, 1995 At December 31, 1994
<S> <C> <C>
Preferred shares outstanding 2,000,000 N/A
Common shares outstanding 45,838,789 47,845,320
Fully diluted shares outstanding 56,445,656 48,947,224
Book value per share (4) $7.50 $6.35
<FN>
(1) Coverage Ratio = net interest income and recurring
non-interest income as a percentage of all general and
administrative expenses.
(2) Estimated.
(3) Restated for all stock splits/dividends.
(4) Book value = Equity divided by common shares and if
converted preferred shares.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
(Unaudited) (Audited)
(in thousands, except
per share data)
<S> <C> <C>
ASSETS
Cash and amounts due from
depository institutions $95,173 $110,270
Interest-earning deposits 13,001 29,131
Loans held for resale (approximate fair
value of $40,365 and $7,666 at
September 30, 1995 and December 31, 1994,
respectively) 39,780 7,666
Investment and mortgage-backed securities
available-for-sale 118,218 87,128
Investment and mortgage-backed securities
held-to-maturity (approximate fair value
of $2,714,226 and $1,701,143 at September 30,
1995 and December 31, 1994, respectively) 2,726,861 1,816,840
Loans 4,621,351 4,350,898
Allowance for possible loan losses (34,480) (36,289)
Premises and equipment 49,469 48,096
Real estate owned 7,423 9,191
Accrued interest receivable 41,166 30,369
Goodwill and other intangible assets 117,751 64,553
Other assets 58,344 46,229
TOTAL ASSETS $7,854,057 $6,564,082
========== ==========
LIABILITIES
Deposits $4,987,862 $4,027,119
Borrowings:
Short-term 1,450,588 1,722,726
Long-term 932,812 439,861
Advance payments by borrowers
for taxes and insurance 19,416 25,893
Other liabilities 48,373 44,583
TOTAL LIABILITIES 7,439,051 6,260,182
========== ==========
STOCKHOLDERS' EQUITY
Preferred stock; 7,500,000 shares
authorized; 2,000,000 shares issued
at September 30, 1995 96,660 0
Common stock; no par value;
100,000,000 shares authorized;
48,365,124 shares issued at September 30,
1995 and 45,566,971 shares issued at
December 31, 1994 248,311 224,958
Unallocated common stock held by ESOP at cost;
2,526,334 shares at September 30, 1995 (23,708) -
Unrecognized gain on investment
and mortgage-backed securities
available-for-sale, net of tax 602 (887)
Retained earnings 93,141 79,829
TOTAL STOCKHOLDERS' EQUITY 415,006 303,900
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $7,854,057 $6,564,082
========== ==========
See accompanying notes to consolidated financial statements.
<FN>
Note: The balance sheet at December 31, 1994 is taken from the
audited financial statements at that date but does not include
all of the information and footnotes required by generally
accepted account principles for complete financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three-Month Period Ended September 30, Nine-Month Period Ended September 30,
1995 1994 1995 1994
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Interest and dividends on investment
and mortgage-backed securities
and other interest-earning assets $44,496 $27,529 $115,218 $76,773
Interest and fees on loans 84,331 66,837 241,238 175,001
Total interest income 128,827 94,366 356,456 251,774
Interest expense:
Interest on deposits 53,678 32,447 155,418 84,516
Interest on borrowings 31,472 21,424 73,250 53,344
Total interest expense 85,150 53,871 228,668 137,860
Net interest income 43,677 40,495 127,788 113,914
Provision for possible loan losses 250 950 750 3,500
Net interest income after provision for
possible loan losses 43,427 39,545 127,038 110,414
Other income:
Other loan fees and service charges 1,053 1,379 3,349 3,556
Deposit fees 2,211 1,490 6,396 3,627
Gain on sale of loans and investment
and mortgage-backed securities
available-for-sale 36 580 172 1,141
Mortgage banking gains 757 131 5,546 565
Miscellaneous income 837 436 3,592 1,276
Total other income 4,894 4,016 19,055 10,165
General and administrative expenses:
Salaries and employee benefits 9,960 9,163 30,297 25,343
Occupancy and equipment expenses 4,526 3,972 14,369 11,792
Outside services 2,213 2,209 7,978 5,872
Deposit insurance premiums 2,867 2,155 8,459 5,284
Advertising 724 852 3,191 2,799
Other administrative expenses 3,391 3,001 10,393 9,269
Total general and administrative expenses 23,681 21,352 74,687 60,359
Other operating expenses:
Amortization of goodwill and other intangibles 2,998 1,761 9,078 4,124
Real estate owned losses/(gains), net (232) 24 403 (238)
Total other operating expenses 2,766 1,785 9,481 3,886
Income before income taxes 21,874 20,424 61,925 56,334
Income tax provision 7,436 8,188 21,214 21,503
Net income $14,438 $12,236 $40,711 $34,831
======= ======= ======== =======
Net Income Applicable to Common Stock $12,875 $12,236 $37,585 $34,831
======= ======= ======== =======
Earnings per share (1) $0.26 $0.24 $0.77 $0.71
======= ======= ======== =======
Dividends per share (1) $0.022 $0.027 $0.088 $0.089
======= ======= ======== =======
<FN>
(1) Per share amounts have been adjusted to reflect all stock
dividends and stock splits.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
SOVEREIGN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEET/SPREAD ANALYSIS
SEPTEMBER 1995
(in thousands)
<TABLE>
<CAPTION>
3RD QUARTER 1995 YEAR-TO-DATE
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate(1) Balance Expense Rate(1)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Short-term funds 17,404 969 22.18% 21,956 2,759 16.80%
MBS and gov't. guar. loans:
Fixed rate 1,654,800 29,055 7.02% 1,372,294 70,915 6.89%
Variable rate 579,322 10,701 7.39% 563,900 30,685 7.26%
Other investments 255,857 3,703 5.93% 247,204 10,640 5.88%
Charter investments 4,457 68 6.10% 4,070 219 7.19%
Total investments 2,511,840 44,496 7.10% 2,209,424 115,218 6.97%
Loans:
Residential mortgage 3,786,658 66,673 7.04% 3,680,840 190,365 6.90%
Residential participation 16,593 334 8.06% 15,076 928 8.21%
Commercial 4,297 91 8.29% 2,430 173 9.39%
Commercial real estate 117,058 2,675 9.06% 106,846 7,547 9.47%
Commercial and commercial real estate
participation 3,493 75 8.59% 3,738 257 9.17%
Consumer:
Home equity 428,765 9,550 8.84% 417,215 27,215 8.72%
Other consumer/credit cards 20,683 493 9.46% 20,940 1,256 8.02%
Charter loans 229,427 4,440 7.73% 232,005 13,497 7.76%
Total loans 4,606,974 84,331 7.31% 4,478,953 241,238 7.18%
Allowance for loan losses (34,412) - - (35,276) - -
Net loans 4,572,562 84,331 7.37% 4,443,677 241,238 7.24%
Total interest earning assets 7,084,402 128,827 7.27% 6,653,101 356,456 7.15%
Non-interest earning assets 362,040 - - 365,994 - -
TOTAL ASSETS $7,446,442 $128,827 6.92% $7,019,095 365,456 6.78%
========== ======== ===== ========== ======== =====
LIABILITIES
Deposits:
Retail 4,471,921 49,135 4.36% 4,357,390 137,842 4.20%
Jumbo certificates 69,243 996 5.70% 68,885 2,806 5.44%
Charter deposits 347,232 3,548 4.05% 340,406 9,908 3.69%
Berkeley deposits 0 (1) 0.00% 159,031 4,862 4.09%
Total deposits 4,888,395 53,678 4.36% 4,925,713 155,418 4.22%
Borrowed funds:
FHLB advances 1,331,269 15,242 5.73% 1,041,104 43,142 5.54%
Repurchase agreements 599,036 9,340 6.12% 496,331 22,917 6.10%
Other 159,216 3,346 8.41% 132,741 8,402 8.44%
Charter borrowings 0 0 0.00% 1,108 52 6.27%
Hedging (11,184) (456) - (9,288) (1,263) -
Total borrowed funds 2,078,337 31,472 5.99% 1,861,996 73,250 5.87%
Total interest bearing liabilities 6,966,733 85,150 4.85% 6,587,709 228,668 4.63%
Non-interest bearing liabilities 67,839 - - 68,191 - -
Total liabilities 7,034,572 85,150 4.80% 6,655,900 228,668 4.59%
STOCKHOLDERS' EQUITY 411,870 - - 363,195 - -
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $7,446,442 $ 85,150 4.53% $7,019,095 $228,668 4.35%
========== ======== ===== ========== ======== =====
NET INTEREST INCOME $ 43,677 $127,788
======== ========
SPREAD ON TOTAL ASSETS 2.39% 2.43%
===== =====
<FN>
(1) Tax-equivalent basis
</TABLE>
